In the best year for the freight transportation industry since the Great Recession, logistics managers chalk up efficiencies that drive further U.S. economic growth. However, capacity issues persist, causing shippers to worry about rate hikes as carriers continue to be meticulous in their partnerships.

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The objective of PTC systems is to prevent train-to-train collisions, overspeed derailments, and incursions into roadway work limits. PTC sends and receives a continuous stream of data transmitted by wireless signals about the location, speed, and direction of trains, according to the FRA. PTC systems, added the FRA, utilize advanced technologies including digital radio links, global positioning systems and wayside computer control systems that aid dispatchers and train crews in safely managing train movements.

A mandate for PTC systems was included in House and Senate legislation-H.R. 2095/S. 1889, The Rail Safety and Improvement Act of 2008. The legislation was passed shortly after a September 12, 2008 collision between a freight train and a commuter train in Los Angeles. And it calls for passenger and certain hazmat rail lines to take effect by 2015 and authorizes $250 million in Federal grants.

The deadline for railroads to submit their PTC implementation plans to the FRA is April 16.

According to a statement from the Senate Commerce Committee, on which Hutchison serves as Ranking Member, traffic patterns for shipping toxic chemicals are changing, in part, due to new Department of Transportation and Transportation Security Administration regulations.

“This means that at least 10,000 route miles used to move chemicals in 2008 are no longer expected to transport these products in 2015,” read the statement. “By requiring that PTC be installed on lines used to transport passengers or certain toxic chemicals based on 2008 usage rather than 2015, the Federal Railroad Administration (FRA) has expanded the Congressional mandate beyond what was intended and dramatically inflated compliance costs.”

The PTC requirement, often referred to as “the unfunded mandate” in railroad circles, has not been warmly received by the railroad industry, due primarily to the high price tag associated with it.

According to FRA estimates, installing PTC technology will cost more than $5 billion for the freight rail industry to install on more than 73,000 miles of tracks by the 2015 deadline, with total costs coming to more than $13 million when passenger trains are included. What’s more, the FRA has publicly stated that the cost-to-benefit ratio of installing PTC is 20-to-1. And the FRA has stated that safety benefits of PTC coming in at between $440 million and $674 million over a 20-year period

Hutchison’s bill was welcome news for the Association of American Railroads (AAR).

“Senator Hutchison has taken an important first step in bringing commonsense to the implementation of PTC, and we urge her Senate colleagues to stand with her and the bill’s original co-sponsors in fighting this excess regulation,” said AAR President and CEO Edward R. Hamberger, in a statement. “Safety is and has always been our priority and we’re eager to work with the FRA to implement a realistic blueprint for the installation of PTC that will not divert critical investment from other safety measures and infrastructure. We must work together to ensure that our world class freight rail network can continue to deliver for America’s economy, and is not slowed down by mandates that hamper our ability to serve our customers effectively and safely.”

This mindset falls in line with a report on PTC prepared for the AAR by management consultancy Oliver Wyman. The report stated that without external funding the PTC requirement will remove capital away from capacity expansion and other programs required by railroads at a time when the economic recovery is going to require additional railroad infrastructure. And the report added that the $5 billion cumulative PTC investment required by Class I railroads equals what Class I’s have doled out over the last four years, coupled with them having to spend hundreds of millions of dollars per year to maintain the PTC system.

Oliver Wyman Managing Director Bill Rennicke told LM that the PTC legislation is essentially a safety mandate, which ultimately will be paid for by shippers in the form of increased rates.

“If there are 10,000 unneeded miles and the government is now going back to provide a more accurate adjustment of the area in which the technology will be applied, it benefits everybody, not just carriers, but shippers, too, because it is a very expensive system being put in for safety reasons, not for economic or efficiency reasons,” he explained.

Despite the costs issues associated with PTC, there is some sentiment that it has potential to improve productivity in network operations.

“Much as the current air traffic control system limits the number of take-off and landings that can be handled at the nation’s airports, the conventional railway signaling system, based on fixed block length and way-side signals is outdated in terms of the capabilities of today’s technologies,” said Brooks Bentz, a partner in Accenture’s Supply Chain practice. “The reformed bill could be a vehicle to actually improve the utilization of fixed and rolling assets, which will add capacity to the network in a way that would not require constructing new track miles (or at least as many as otherwise will be needed) in order to accommodate future growth. This could be a significant benefit to rail users, carriers and the public if it is structured to incent such an outcome.”

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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